PBOC to pro­hibit il­le­gal lend­ing to home­buy­ers

Govern­ment to of­fer more land in big cities to meet de­mand

The cen­tral bank will pro­hibit real es­tate bro­ker­ages and prop­erty de­vel­op­ers from run­ning fi­nanc­ing ser­vices if they do not have rel­e­vant li­censes, Peo­ple’s Bank of China Deputy Gov­er­nor Pan Gong­sheng said onWed­nes­day.

Pan, also a mem­ber of the Chi­nese Peo­ple’s Political Con­sul­ta­tive Con­fer­ence Na­tional Com­mit­tee, made the re­marks at a panel dis­cus­sion at the CPPCC an­nual meet­ing as con­cerns are mount­ing over po­ten­tial risks fu­eled by those in­sti­tu­tions’ lev­er­age in the real es­tate mar­ket.

Me­dia re­ports said a num­ber of bro­ker­ages and fi­nan­cial in­sti­tu­tions, in­clud­ing Lian­jia and 5i5j, have lent their clients money to al­low them pay the down pay­ment.

This move, which ar­ti­fi­cially in­creases the lev­er­age in home pur­chases, will fuel a price hike and cause a big worry when a price cor­rec­tion oc­curs, in­dus­try ex­perts said.

“We are com­mu­ni­cat­ing with the Min­istry of Hous­ing and Ur­ban-Ru­ral De­vel­op­ment to reg­u­late such be­hav­iors. Real es­tate bro­ker­ages and prop­erty de­vel­op­ers are not al­lowed to run fi­nanc­ing ser­vices be­fore they ob­tained rel­e­vant li­censes,” said Pan.

Ac­cord­ing to Zhang Dawei, chief an­a­lyst at Cen­taline Prop­erty, the size of such fi­nanc­ing ser­vices in Bei­jing will be around 1.8 bil­lion yuan ($277 mil­lion).

“The down pay­ment could be ac­tu­ally low­ered by 10 to 20 per­cent with those fi­nanc­ing prod­ucts, thus al­low­ing fi­nan­cially un­qual­i­fied buy­ers to en­ter the mar­ket and re­sult in a price hike of more than 30 per­cent in no time,” said HuangQi­fan, mayor ofChongqing and a deputy to the Na­tional Peo­ple’s Congress, dur­ing a panel dis­cus­sion at the NPC.

“This is no dif­fer­ent from the bal­loon­ing of the Shang­hai Com­pos­ite In­dex fu­eled by the lev­er­age last year.”

Cur­rently, the down pay­ment for first-home pur­chasers stood at 30 per­cent in Bei­jing, Shang­hai, Shen­zhen and Guangzhou, and 20 to 25 per­cent in other cities.

Home prices in cities like Shen­zhen, Bei­jing and Shang­hai have seen a surge in re­cent months.

Prices in Shen­zhen have in­creased 72 per­cent in the past 12 months alone, ac­cord­ing to the Shen­zhen Ur­ban Plan­ning, Land and Re­sources Com­mis­sion. Shang­hai and Bei­jing are fol­low­ing suit.

The sup­ply-de­mand im­bal­ance and the eas­ing of mon­e­tary pol­icy are re­garded as ma­jor rea­sons for this round of price surge.

“Those fi­nanc­ing ser­vices pro­vided to home­buy­ers do add fuel to the flame and we should warn against the po­ten­tial risks,” said Jia Kang, a mem­ber of the CPPCC Na­tional Com­mit­tee and for­mer di­rec­tor of the Min­istry of Fi­nance’s Re­search In­sti­tute for Fis­cal Sci­ence.

To ease con­cern over fas­tris­ing home prices, Min­is­ter of Land and Re­sources Jiang Daming said on Wed­nes­day that the govern­ment will of­fer more land in those cities ex­pe­ri­enc­ing a price surge.